EMPLOYEES, INDEPENDENT CONTRACTORS, AND WHY THE DIFFERENCE MATTERS TO STRATA CORPORATIONS

"If you think that hiring professionals is expensive, try hiring amateurs." -- Red Adair.

WHY DOES THE DIFFERENCE BETWEEN AN EMPLOYEE AND AN INDEPENDENT CONTRACTOR MATTER?

The distinction between an employee and an independent contractor is critically important for strata corporations because the legal, financial, and administrative consequences are very different. Strata corporations often hire caretakers, cleaners, gardeners, bookkeepers, building managers, concierge staff, maintenance workers, and other service providers. In many cases, strata councils assume that if the person has been called a “contractor,” submits invoices, or has signed a contractor agreement, the issue is settled. It is not.

The law looks at the substance of the relationship, not just the label placed on it. A person may be described as an independent contractor in a written agreement, but still be found to be an employee if the actual working relationship has the characteristics of employment. The BC Employment Standards Branch expressly warns that the Employment Standards Act applies to employees regardless of whether they are full-time, part-time, temporary, or casually employed, and the Province provides specific guidance on the employee-versus-independent-contractor distinction.

This distinction matters because employees are entitled to statutory protections, including minimum employment standards, vacation pay, statutory holiday pay, overtime where applicable, and termination notice or pay in lieu of notice. They may also be entitled to common law reasonable notice. Independent contractors, by contrast, are generally operating their own business and are not entitled to those same employment protections.

WHAT IS THE BASIC DIFFERENCE BETWEEN AN EMPLOYEE AND AN INDEPENDENT CONTRACTOR?

An employee is generally someone who works within the strata corporation’s organization and is subject to the strata corporation’s direction and control. The strata corporation decides what work is done, how it is done, when it is done, and often provides the tools, equipment, workspace, and structure through which the work is performed.

An independent contractor is generally someone who is carrying on business for themselves. They offer services to the strata corporation as a separate business, control how the work is performed, provide their own tools or equipment, may work for other clients, may hire helpers, and may bear the risk of profit or loss. CRA guidance similarly focuses on whether the worker has a real opportunity for profit and risk of loss, including the ability to negotiate pricing, accept work from more than one payer, incur expenses, and manage those expenses to maximize net earnings.

In practical strata terms, the distinction often comes down to this:

• An employee works for the strata corporation.

• An independent contractor provides services to the strata corporation.

That difference may seem small, but legally it is enormous.

HOW DOES ONE DETERMINE IF A PERSON IS A CONTRACTOR OR AN EMPLOYEE?

The leading Canadian test for distinguishing between employees and independent contractors is commonly referred to as the Wiebe Door test, from Wiebe Door Services Ltd. v. M.N.R. The test does not turn on one single factor. Instead, it considers the whole relationship between the parties, including control, ownership of tools, chance of profit, risk of loss, and integration into the payer’s business.

The main factors are:

• Control – Who controls how, when, and where the work is done?

• Ownership of tools – Who supplies the tools, equipment, materials, uniform, phone, vehicle, or workspace?

• Chance of profit – Can the worker make more money by managing the work efficiently, hiring others, or taking on other clients?

• Risk of loss – Can the worker lose money if the job is underpriced, takes too long, requires rework, or involves unexpected costs?

• Integration – Is the worker operating as part of the strata corporation’s organization, or are they operating an independent business that provides services to the strata corporation?

  
  

None of these factors is decisive on its own. The legal question is whether, looking at the total relationship, the person is truly in business for themselves or is instead working as part of the strata corporation’s operations.

HOW DOES CONTROL AFFECT THE ANALYSIS?

Control is often the most important factor in the strata context. If the strata corporation or strata council tells the worker exactly what hours to work, what tasks to perform each day, how to perform them, what order to do them in, where to be, what to wear, and how to interact with residents, that looks more like employment.

By contrast, if the strata corporation hires a cleaning company to clean the common areas twice per week, and the company decides which staff to send, what equipment to use, how to complete the work, and how to manage its own schedule within the contract requirements, that looks more like an independent contractor relationship.

This does not mean that a strata corporation cannot set standards for contractors. A strata corporation can require contractors to perform work safely, comply with bylaws, meet contractual specifications, maintain insurance, and complete work by a deadline. The problem arises when the strata corporation moves from setting the desired result to controlling the day-to-day manner in which the worker performs the work.

WHY DO TOOLS, EQUIPMENT, AND BUSINESS RISK MATTER?

A true independent contractor usually brings something more than labour. They often bring tools, equipment, insurance, business systems, employees or subcontractors, expertise, and the risk that comes with running a business.

For example, a landscaping contractor who provides its own truck, tools, insurance, employees, WorkSafeBC coverage, and invoices multiple clients is more likely to be an independent contractor. A resident who is paid monthly to do gardening, uses the strata’s tools, works only for the strata, follows council’s daily instructions, and has no real business risk is more likely to be an employee.

The same issue arises with caretakers and building managers. A “contract caretaker” who works fixed hours, lives on site, reports directly to council, performs whatever tasks council assigns, uses strata equipment, cannot send a substitute, and does not provide services to others may be an employee even if the written agreement calls them a contractor.

WHAT ARE THE WARNING SIGNS THAT A “CONTRACTOR” MAY ACTUALLY BE AN EMPLOYEE?

A strata corporation should be cautious where the worker:

• Works only for the strata corporation.

• Has worked for the strata corporation for many years.

• Is paid hourly or by regular salary-like payments.

• Has fixed hours set by council.

• Is supervised closely by council or a property manager.

• Uses the strata corporation’s tools, equipment, supplies, or workspace.

• Cannot hire helpers or send a substitute.

• Has no real chance of profit or risk of loss.

• Does not advertise services to the public.

• Does not carry insurance.

• Does not have a business licence, GST number, or other business indicia.

• Performs ongoing operational duties that are central to the strata’s daily functioning.

The more of these factors that exist, the greater the risk that the worker is an employee.

DOES A WRITTEN AGREEMENT SOLVE THE PROBLEM?

A written agreement is important, but it is not enough by itself. A contract that says “independent contractor” will help only if the actual relationship is consistent with independent contractor status.

For example, a written contractor agreement will not prevent an employment finding if the strata corporation controls the worker like an employee, requires fixed hours, provides all equipment, prohibits work for others, and integrates the person into the strata’s daily operations.

The written agreement should match the practical reality of the relationship. If the strata wants an independent contractor, the relationship should be structured and managed that way from the beginning.

WHY IS MISCLASSIFICATION A PROBLEM FOR STRATA CORPORATIONS?

Misclassification occurs when a strata corporation treats a worker as an independent contractor when, legally, the worker is actually an employee. This can create significant exposure.

If the person is later found to be an employee, the strata corporation may face claims for:

• Unpaid vacation pay.

• Statutory holiday pay.

• Overtime or minimum wage compliance issues.

• Termination pay under the Employment Standards Act.

• Common law reasonable notice.

• Payroll remittances, CPP, EI, and tax-related consequences.

• WorkSafeBC registration, premium, or clearance issues.

• Administrative time, legal fees, and owner conflict.

For strata corporations, the risk is often worse because these relationships can continue for years. By the time the relationship ends, the potential liability may be much larger than anyone expected.

CONCLUSION ON EMPLOYEES, INDEPENDENT CONTRACTORS, AND STRATA CORPORATIONS

The distinction between an employee and an independent contractor is not determined by what the strata corporation calls the person. It is determined by the actual relationship between the parties. The Wiebe Door test looks at control, ownership of tools, chance of profit, risk of loss, and integration to determine whether the worker is truly operating an independent business or is instead working as part of the strata corporation’s organization.

For strata corporations, this distinction matters because employees come with statutory and common law rights. If a person is misclassified as a contractor, the strata corporation may face claims for employment standards entitlements, termination pay, common law reasonable notice, tax and payroll consequences, WorkSafeBC issues, and legal costs.